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Certainly a Recession, but an Odd One

RESTAURANTS from Southport to Vernon to West Hartford are crowded; some manufacturers are reporting growing profits and are considering hiring more workers; housing permits are up, and defense contractors are saying they expect to have a good year in 2002.

What kind of recession is this?

The state, along with the rest of the country, was slipping into recession before Sept. 11, when the terrorist attacks pushed the economy over the edge. But while the national unemployment rate rose to 5.4 percent in October, the Connecticut rate actually fell to 3.2 percent, down from 3.6 percent in both August and September.

By all accounts, this recession isn't going to be anything near what the state experienced during the last one, when from 1989 to 1992 the state lost 158,000 jobs, jobs that weren't fully replaced until January 2000. This time many economists estimated that only a maximum of 45,000 jobs will be lost and the recovery will begin as early as the middle of next year, although the recovery itself may be slow.

''We will stop the declines in jobs in 2002,'' said Daniel Kennedy, senior economist at the Connecticut Department of Labor. ''In 2002 we'll be trying to come out of it, and it's going to be anemic. You may see some job growth in 2003, but nothing significant until late 2003 and early 2004.''

Economists said that what is muting the recession in the state, at least so far, is that the economy is more diversified than it was during the last recession and that the state does not have to contend with the speculative building boom and bust and subsequent bad debt crisis of 10 years ago. Also, the growth in service jobs has offered some protection, said Steven Lanza, an economist at the University of Connecticut.

''Services are holding up pretty well,'' Mr. Lanza, ''and our economy is more reliant on service jobs.''

Nicholas Perna, an economist in Ridgefield who was chief economist for Fleet Financial Group, said that barring anything unexpected, like another terrorist attack, the downturn will not last long.

''This recession will be over in four or five months, and it's going to be followed by a fairly impressive recovery,'' Mr. Perna said. ''We're going to look a lot like the national economy, and the national economy should be out of recession next spring, around March or April.''

Stimulation from the 11 interest rate cuts with another one possible, the federal tax refunds that were distributed this summer, ''plus the added defense and security outlays ought to make for a pretty decent expansion starting in the spring,'' Mr. Perna said.

Although October figures show that durable goods manufacturing, financial services, retail and wholesale trade, and technology continued to have the largest job losses, which started after Sept. 11, pockets of profitability sprinkled statewide have some business owners very relieved.

Owners of moderate-priced restaurants in Southport, Stamford, Vernon, Hartford, Glastonbury, Avon and West Hartford all said they had solid though not spectacular 5 percent to 6 percent increases from September through November over the same period last year.

It took anywhere from one to six weeks after the attacks for their businesses to recover, they all said.

''Weekends are particularly strong, but there's less during the week,'' said Richard Rosenthal, owner of the Max chain of five restaurants in Hartford and its affluent suburbs. ''People are spending, but businesses aren't. People go out on the weekends. But when the boss decides he needs to make year-end numbers, he freezes discretionary spending.''

The Southport Brewing Company and its sister location in Stamford had ''a lot of corporate parties cancel,'' the owner, William daSilva, said. ''Now it's starting to pick up again. We're booked for Christmas both places, partywise.''

In manufacturing, the W. E. Bassett company of Shelton, which employees about 120, also reported growing sales. It makes the Trim brand of nail clippers and emery boards.

Sales are up 13 percent for the year through November over the same period last year, with a 25 percent gain in October and 20 percent in November, William Bassett, the president, said. After Jan. 1, he said, a decision will be made on ''how many permanent employees we will need to hire.''

On the other hand, Allyson Bernard, a real estate agent in Danbury and president of the Connecticut Association of Realtors, has seen a drop in her residential sales. Ms. Bernard usually sells or buys about 25 to 30 homes a year, most going for $200,000 to $300,000.

''Before Sept. 11, I had four to five active listings and eight to 10 contracted buyer clients on average,'' Ms. Bernard said. ''Now I have three listings and five contracted buyer clients, but it's not all doom and gloom.''

The end of the year is traditionally slow, she said, but low interest rates and sparse inventory have kept traffic flowing, and prices have held steady.

''Buyers are waiting and being more patient,'' Ms. Bernard said. ''Before, if a new property came on the market they might make an offer right there and then. Now they sleep on it. The good news for everybody involved is they're more positive and committed once they decide to go forward.''

Ms. Bernard, reported home sales down in most of Fairfield County, with an average price of $381,734, down from $403,506. The Greater Hartford market saw new listings rise, with an average price of $201,594, up from $187,694. Eastern Connecticut had more home sales in the third quarter with an average sale price of $190,891, up $14,000. And the shoreline/Middlesex County area had fewer home sales from Sept. 1 through Nov. 28.

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Lux Bond & Green, a jewelry, watch, and giftware chain with stores in Hartford, West Hartford, Glastonbury, Westport, Greenwich and the Mohegan Sun casino, reported profits off ''double digits'' in September. But October and November were up by ''single digits,'' said Marc Green, the owner.

''We were pleasantly surprised at how much business came back in Fairfield County,'' Mr. Green said. ''But the merchandise is a little different mix. I'm selling a lot more religious jewelry and charm bracelets, and we've sold more engagement rings in all the stores.''

Some of the state's largest employers are also continuing to report solid results.

United Technologies, the Hartford defense contractor, showed a 14 percent third-quarter gain in earnings, although it announced in October that it would be cutting 2,500 jobs in the state. The drug company, Pfizer, which has a research operation in the New London area, also reported double-digit earnings growth in the third quarter. The company also predicted it would have an even better year in 2002, as did Fairfield-based General Electric.

Still, the manufacturing industry lost 1,600 state jobs from September through October, and for the first 10 months of the year 9,200 jobs disappeared from the same period last year. Most of that was in durable goods manufacturing. James Moor, a professor at the University of Connecticut Business School, said he doesn't expect the manufacturing industry to do well.

''It always tends to take it on the chin in a global recession,'' said Mr. Moor, formerly chief economist at the Hartford Financial Services Group. ''This is the first synchronous global recession since the early 1980's, so exports, which we are long on in Connecticut, are not going to be a strong suit.''

He also said that a lingering weakness will persist in financial services, ''which is getting the double whammy of a recession plus World Trade Center losses for local insurers and re-insurers in particular.''

The state reported that it lost about 4,000 jobs from the end of September through October, but actually gained 800 jobs from October of last year. With forecasts ranging from 35,000 to 45,000 jobs lost for this recession, the overall total of lost jobs would be a mere quarter of the last recession's.

Minnie Clancy of Bloomfield, who worked for LSG Sky Chefs of East Granby, which prepares in-flight meals for airlines at Bradley International Airport, lost the job on Sept. 25. Her job became expendable when many airlines cut back meal service on domestic flights.

Since then Ms. Clancy, 49, has applied for similar food service jobs but has had no luck. ''The places I did have luck I didn't want it because it starts back at the bottom again,'' she said. ''I'm finding very low-paid jobs, and even those are snatched up, so I'm giving up right now.''

In October, the state had 542,200 service jobs, down 600, or 0.1 percent, from 542,800 during the previous October, but up 1,300 from September. Restaurant services gained 300 jobs, health services 2,300 jobs, hotels lost 200, and business services lost 5,300 from October 2000. Restaurant jobs, such as Ms. Clancy's, however, fell by a total of about 2,000 in September and October.

Construction, usually hit hard in recessions, actually increased by 200 jobs from September through October, although they were down by about 2,000 from the previous October.

Transportation, communications, and utilities lost 1,000 jobs between September and October, with 2,200 jobs lost from October, 2000. The retail and wholesale trades lost 1,800 jobs from September to the end of October and lost 3,800 jobs compared with October, 2000.

The recession has also hit the state's tax revenues. For the first 10 months of the year, total tax revenues declined 4.3 percent. Although revenues fell 7.9 percent in September compared with the same month last year, revenues in October fell only 3.2 percent.

Housing permits also showed some life. The state issued permits for 820 units in October and 7,912 for the year through October, compared with 7,850 a year ago.

Economists warned that there are still many unkowns. Consumer spending, for example, is a key issue, much of it coming in the fourth quarter as people shop for the holidays.

''Consumers represent two-thirds of Connecticut's gross state product, but it's difficult to forecast anything in these times,'' said Mark Prisloe, chief economist of the State Department of Economic and Community Development. He said that with New York State reporting a 30 percent decline in Wall Street bonuses this year, spending on big-ticket items such as cars and vacations will likely decline, especially in Fairfield County.

Edward Deak, an economics professor at Fairfield University, said other risks include the war against terrorism, increasing personal bankruptcies and business failures, the erosion of the dollar, energy prices and supplies, and the effect of job worries.

''The risks are just a laundry list of potential events, some or all of which may never materialize,'' he said. ''However, collectively they raise concerns that breed caution at a time when cyclical recovery demands confidence.''

How long before Connecticut gets back on its feet is the big question, Mr. Kennedy said.